It was a film with no lead actor that laid claim to the Russian box office last year. Vladimir Semyonovich Vysotsky, the immensely popular Soviet-era singer-songwriter, poet, actor and man of protest, was always going to be the only person on stage when his biopic got made. The marketing campaign for Vysotskiy. Spasibo, Chto Zhivoy (Vysotsky, Thank God I'm Alive), which opened on 1 December 2011, kept shrewdly stumm about the identity of the actor behind the CGI and the $30,000 silicone mask used to resurrect a national hero (described to me as "John Lennon crossed with James Dean, but sounding like Dylan").

A mystery wrapped inside a dissident enigma, then, and Russians made it the top-grossing local movie of the year ($28m and counting). But they'd left it late to honour their own: up to December, there hadn't been a single Russian film in the top 20. The film expected to create a bombastic box-office crater – war epic Burnt By the Sun 2, at $40m the country's most expensive production ever – fizzled out embarrassingly when part two was released in May. A few years ago, Russians learned to stop worrying and love the blockbuster as they began producing SFX-laden spectaculars like Night Watch; now they're learning about the flipside – the car-crash pleasures of rubbernecking a box-office flop.

The mood has been sombre for the last couple of years. Since the mid-noughties commercial surge, Russian films have had less impact at home, crowded out by Hollywood films scrabbling for the still-expanding box office. A local contender hasn't topped the yearly charts there since 2007's Irony of Fate 2, directed by Timur Bekmambetov, the Kazakh prodigy behind the Watch films, whose attention has been increasingly drawn Hollywood-wards.

A year after that came the credit crunch. "Russia was hit more than most," says Anna Kokourina, vice-president of production at Fox International Productions. "I know a lot of films that were meant to be done on five, six, seven million dollars that were done on two instead. So quality suffered greatly. Right now, we're still seeing films at the box office that were made during that time. There's always a delayed effect."

The financial kidney punch was so sapping it even managed to halt Russia's box-office boom as well: there was a sharp drop in 2009, where there had been constant growth since 2000. Local productions reportedly dropped from 220 to 70 between 2008 and 2009.

Unsurprisingly, Hollywood has benefited from the shortfall, and it's easy to cast it as the villain of the situation. But it isn't that simple. Kokourina says that the US presence should be seen as a challenge, not a colonisation: "What Hollywood movies do is make an audience more sophisticated – they raise movies to a higher standard. The producers need to recognise that and make better movies." Her unit – part of the wave of US studio divisions producing local-language movies in most emerging-cinema hotspots – is doing exactly that, she says. Russia doesn't have many film schools, and by insisting on rigorous script development, Fox is getting local producers to raise their game.

The stimulus could, despite the slump, be working. What's interesting is that while the monster Russian-language hits have disappeared, the amount of medium-sized ones – taking, say, over $10m – has continued growing. It looks like Hollywood has stretched the market out, and local producers have been readjusting to the new scale of the playing field.

Another puzzler: Hollywood's regional divisions have yet to seriously break in. Only the Vysotsky film and 2009's The Very Best Film 2 (a Meet the Spartans-style spoof – proving that bottom-feeding happens everywhere), both co-produced by Universal and its Russian partner, has been significant successes. So perhaps Russian film-makers are in a stronger position than it appears as the credit-crunch hangover starts to lift.

Russia, like they used to say, is a sleeping giant: it's already the seventh biggest cinema market in the world, and that's on fewer screens than the countries above it (about 2,500, compared to 40,000 in the US). Competition over its cinema fans will be fierce: Hollywood, as it continues to press with its local-language infiltration, knows it. China and Germany, who are angling for their own co-productions, know it.

Its most savvy commercial operator, Bekmambetov, knows it too. After abandoning the Watch franchise before the third instalment (mooted to have been in English) could take it global, he's now trying to do the same thing in reverse: setting The Darkest Hour, which he produced, in Moscow. This is his attempt to make sure his Hollywood output doesn't neglect its Eurasian roots.

Early signs are that 2012 could be big, and it's time for another local breakthrough. Where 2011 was all too quiet, Vysotsky has already been followed over the $20m hurdle by the Russian New Year's Eve portmanteau Yolki 2 (which also has Bekmambetov's hand in it) and the folk tale animation Ivan Tsarevich i Seryy Volk (Ivan Tsarevich and the Grey Wolf). Whatever your competitors do, stay right behind them – where could Russian cinema have learned that trick? Maybe feeling hot Hollywood breath on its neck has done it some good.